Property prices stabilise further as the downturn eases
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The Australian property market is off to a milder start for 2023, with national prices dropping just -1.0 per cent in January according to CoreLogic's latest report.
As declines continue to slow and interest rates approach their peak, the market should display more stability in the months ahead.
For now, listings remain well below average, but there could be a shift in activity as consumer sentiment improves.
National property prices: January 2023
The -1.0 per cent price correction seen in January is equal to November's result, both representing the most gentle decline since the early stages of the RBA's rate tightening cycle.
Most capital markets saw month-on-month improvement, although two of the most consistent performers experienced a slight increase in the downturn.
| Market | Month | Quarter | Annual | Median value |
|---|---|---|---|---|
| Sydney | -1.2% | -3.9% | -13.8% | $999,278 |
| Melbourne | -1.1% | -3.1% | -9.3% | $746,468 |
| Brisbane | -1.4% | -4.8% | -4.7% | $698,204 |
| Adelaide | -0.8% | -1.5% | 6.9% | $646,045 |
| Perth | -0.3% | -0.1% | 2.7% | $559,971 |
| Hobart | -1.7% | -5.5% | -9.5% | $666,431 |
| Darwin | -0.1% | -0.4% | 3.7% | $500,228 |
| Canberra | -1.0% | -3.4% | -5.9% | $841,605 |
| Combined capitals | -1.1% | -3.3% | -8.7% | $763,110 |
| Combined regional | -0.8% | -2.6% | -2.3% | $574,835 |
| Australia | -1.0% | -3.2% | -7.2% | $702,725 |
Sydney and Melbourne both enjoyed a further softening of the decline, with median prices dropping -1.2 per cent and -1.1 per cent respectively.
There was an easing in Brisbane too as prices ticked down -1.4 per cent, a significant improvement from October and November's -2.0 per cent falls.
Adelaide and Perth were the only two capitals that saw conditions worsen, although declines were still relatively small compared to other cities. Adelaide prices dropped -0.8 per cent for the month, while Perth was down just -0.3 per cent.
Hobart was again the worst performer of the bunch, posting declines of -1.9 per cent. Darwin held relatively flat with -0.1 per cent and Canberra matched the national average at -1.0 per cent.
Regional markets continued to outperform the capitals as a whole, dropping -0.8 per cent in January, suggesting further resilience.
CoreLogic's research director Tim Lawless said that "the quarterly trend in housing values is clearly pointing to a reduction in the pace of decline across most regions."
He did, however, point out that "at -1.0 per cent over the month and -3.2 per cent over the rolling quarter, national housing values are still falling quite rapidly compared to previous downturns.”
New Year listings are still far below average levels
New stock coming onto the market was again particularly slow as 2023 kicked off.
New capital city listings over January were -22.9 per cent lower than the same period in 2022 and held -24.5 per cent lower than the five-year average.
"This trend of lower than normal levels of new listings has been persistent through spring and early summer and looks to be continuing into 2023," Mr Lawless said.
That trend applied across every capital city market, suggesting ongoing hesitancy from sellers.
"Such a low number of new listings implies most homeowners don’t need to sell, rather, they seem to be prepared to wait this downturn out."
Demand has also shrunk as buyers have acted with caution in the rate-tightening environment, as sales volumes over the past three months were down -11.5 per cent on the five-year average.
"There is a strong relationship between consumer attitudes and the number of home sales. With sentiment remaining around recessionary lows, it’s harder for consumers to make high commitment decisions such as buying or selling a home," Mr Lawless said.
Auction clearance rates are on the rise
The property market is typically slow to get going in January as people return from summer holidays, but there's promising evidence that 2023 is off to a strong start.
CoreLogic's auction clearance data shows a noticeable pick-up in the new year after a weak December.
Over the final weekend of January, CoreLogic's preliminary auction clearance rate statistics show Sydney and Melbourne hovering around the 70 per cent mark, with the national average sitting around 68 per cent.
While CoreLogic notes these numbers are likely to be revised down as more data is collected, they still represent a more robust auction market than was seen over the second half of 2022.
Regionals still 'holding up better than capital city markets'
The strong run of regional markets compared to their capital city counterparts has continued into 2023.
A milder -0.8 per cent drop for the combined regions in January represented another relatively calm month after the extended boom period that saw regional home values soar by +41.6 per cent.
| Market | Month | Quarter | Annual | Median value |
|---|---|---|---|---|
| Regional NSW | -1.0% | -3.8% | -5.2% | $684,246 |
| Regional VIC | -0.7% | -2.2% | -3.5% | $563,028 |
| Regional QLD | -0.8% | -2.5% | -0.8% | $549,562 |
| Regional SA | 0.5% | 2.3% | 15.3% | $352,955 |
| Regional WA | 0.4% | 1.9% | 4.9% | $424,210 |
| Regional TAS | -1.1% | -1.6% | -0.4% | $506,293 |
| Combined capitals | -1.1% | -3.3% | -8.7% | $763,110 |
| Combined regional | -0.8% | -2.6% | -2.3% | $574,835 |
"Despite easing rates of internal migration and a partial erosion of the pre-pandemic affordability advantage, regional housing values are holding up better than capital city markets," Mr Lawless said.
He explained that the ability for many Australians to continue to work remotely, a "mass exodus" from regional areas looks unlikely, meaning that market strength should continue.
"This will be an interesting trend to watch over the longer term, but at the moment it seems regional housing markets have seen a structural shift in the underlying demand profile," he said.
What's next for the Australian property market?
Following a pause in January, when the RBA board skips its monthly monetary policy meeting, it looks highly likely that there is at least one more cash rate hike in store.
However, Mr Lawless said that inflation looks to have moved through a peak, and as a result interest rates should be nearing their ceiling. After that happens, Australian home prices may begin to flatten out.
But when might prices start to rise again? "The most obvious stimulus would come from a drop in interest rates, but any cut to the cash rate probably won’t occur until late this year at the earliest," he said.
"Other factors that could support housing activity would be a rise in consumer sentiment, an easing in credit policy… or fiscal incentives aimed at stimulating housing demand."
Any rise in listings as the year unfolds could hurt prices further, but for now the below-average stock levels have "arguably helped to keep a lid on value declines."
2023 will also see a steep increase in immigration, serving to worsen the country's rental crisis. There may be an increase in buyer demand as a result, both from investors and from tenants looking to escape the situation and make a property purchase.
1. CoreLogic News, 'CoreLogic Home Value Index rate of decline eases despite -1.0% fall in January', 1 February 2023
https://www.corelogic.com.au/news-research/news/2023/corelogic-home-value-index-rate-of-decline-eases-despite-1.0-fall-in-january
2. CoreLogic News, 'The 2023 auction market is slowly ramping up with 706 capital city homes taken to auction this week', 30 January 2023
https://www.corelogic.com.au/news-research/news/2023/the-2023-auction-market-is-slowly-ramping-up-with-706-capital-city-homes-taken-to-auction-this-week
